Bulkowski. That name has spawned some interesting salvos on the message board dismissing his prognostications. I can't speak to his market direction calls, but I would like to address one of his positive themes in trading: research. It's one thing to cite a chart pattern as being worthwhile and then trading it. It's quite another to cite a chart pattern, find hundreds of examples in both bull and bear market scenarios, assess the probability of success, and then perform a prospective study on whether the pattern continues to work. Because I spent 11 years rotting in college, graduate, and professional programs, I performed a fair amount of research myself and appreciate this approach to problem solving over the "gut" instincts typically used in trading methodologies.
Today I'll cover Bulkowski's best performing setup for both bull and bear markets, the High and Tight Flag. This pattern is the most reliable of the 23 setups covered. Here I've listed two charts of SCSS: the setup, and the resulting breakout.
Keep in mind that 54% of these experience throwback, which simply means that following breakout the price retreats to the horizontal support before ultimately moving higher to the target.
One final note, If you find a sluggish breakout, consider closing the position. There should be no indecision in the price action.
